More inventory, fewer bidding tussles, and slowing price growth signal a more balanced market

Homebuyers and sellers have been slow to re-enter the market, but lower mortgage rates could change that in the coming months.
Mortgage rates dipped by about a quarter of a percentage point in February and have continued their downward trend into March, hitting levels not seen since December, according to Zillow’s latest housing market report. The shift is expected to provide relief to prospective buyers and encourage more homeowners to list their properties.
“Mortgage rates and home prices have gone up a lot in the last three years, and that terrible combination has discouraged people who want to buy homes," said NerdWallet mortgage expert Holden Lewis.
The report also pointed to slowing home value growth. Typical home values increased by 2.1% year over year – the slowest pace in 18 months and the weakest for any February since 2012. Pending listings declined nearly 8% annually, but they remain about 10% above pre-pandemic levels. Zillow research suggests that sellers could still command higher prices through July, even with tempered demand.
"Affordability is still a massive challenge for those who have been waiting to buy a home, but the lower rates we've seen so far in March are taking the edge off," Zillow chief economist Skylar Olsen said in the report. "Rate dips tend to energize buyers and sellers both; if they continue or hold, we should see more activity.
“Economic uncertainty is a counterbalance, one that will be felt in some areas of the country more than others. People tend to shelter in place when the future of their job or industry is uncertain."
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While affordability remains a significant challenge, buyers have more inventory to choose from compared to previous years. February saw 1.04 million homes on the market, the highest February total since 2020 and a 15% increase from last year, even as new listings slowed by nearly 5%.
The rise in available inventory has softened competition, with listings spending an average of 23 days on the market before going under contract, six days longer than a year ago.
Buyer confidence has also held strong. As of November 2024, 15% of Americans indicated they planned to purchase a home in the next 12 months, according to NerdWallet. The figure underscores pent-up demand and continued optimism despite affordability pressures.
At the national level, the market remains balanced, with neither buyers nor sellers holding a significant advantage. Zillow's market heat index, which gauges negotiating power, shows a level playing field, a dynamic not seen in February since 2019.
Meanwhile, the rental market is experiencing a shift in demand. Zillow reports that multifamily rent growth is now outpacing single-family home rentals for the first time since June 2024, driven by a rise in single-family construction, slowing apartment development, and ongoing affordability concerns.
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